A. Per-Unit Costs at the Clip Joint
Explanation

Average total cost (ATC) is total cost divided by output: $320 for 40 haircuts is $8 each. It starts high, because at low output the $160 fixed cost is spread over few haircuts, falls as the fixed cost is spread more thinly, and eventually rises again as diminishing returns push total cost up faster than output. Average variable cost (AVC) leaves out the fixed cost, so it lies below ATC and the gap between them, the average fixed cost, shrinks as output grows.

Marginal cost (MC) is the cost of one more haircut. Whenever MC is below an average, it pulls the average down; whenever it is above, it pushes the average up. So MC crosses AVC and ATC at their minimum points, marked by the dots and dashed lines. All three curves come from the table's costs; the sliders change the fixed cost and the wage, and the curves follow.

Costs